The Ministry of Manpower (MOM) advises employers to carry out any retrenchment exercise responsibly, in consultation with the union (if the company is unionised).
The company should pay all salaries (including unconsumed annual leave, notice pay, etc.) to the employees on their last day of work.
Notice of Retrenchment
As far as possible, affected employees should be informed of the impending retrenchment before notice of retrenchment is given. The duration of notice will depend on what is stipulated in the contract of service.
If the notice period is not stipulated, the following will apply:
|Length of service||Notice period|
|Less than 26 weeks||1 day|
|26 weeks to less than 2 years||1 week|
|2 years to less than 5 years||2 weeks|
|5 years and above||4 weeks|
The company is also advised to notify MOM of any retrenchments.
Under the Employment Act, an employee who has been employed in a company for at least three years can request for retrenchment benefits if he/she is retrenched.
As the law does not stipulate the quantum to be paid, the amount is subject to negotiation between the employee and employer. The quantum will also depend on the company’s financial position.
An employee who has worked less than three years in a company is not entitled to retrenchment benefits under the Employment Act. However, the company may pay an ex-gratia payment at its discretion.
The prevailing norm is to pay a retrenchment benefit varying between 2 weeks’ to 1 months’ salary per year of service. However, in unionised companies where the quantum of retrenchment benefit is stipulated in the collective agreement, the norm is one month’s salary for each year of service.
Both retrenchment benefits and ex-gratia payments do not attract CPF contributions.
Alternatives to Retrenchment
Alternatives to retrenchment for a company with excess manpower include:
- Temporarily laying off employees for a short period of time
- Guidelines on Temporary Layoff
- Request your employees to take up to 50% of their earned annual leave
- Duration of layoff should not exceed 1 month
- Pay the affected employees not less than half of their gross daily salary during the layoff period
- Implementing a shorter workweek.
- Guidelines on Shorter Workweek
- Request your employees to take up to 50% of their earned annual leave before effecting the shorter workweek
- Reduction in workweek should not exceed 2 days in a week and not last for more than 2 months
- Pay the affected employees not less than half of their daily salary when shorter workweek is implemented
Workers and trade unions (if workers are unionised) should be consulted on the implementation of shorter workweek or temporary layoff as well as the level of payment
to be given to the affected workers, taking into consideration the performance and financial position of the company.
The reduction in workweek should not:
- Exceed two days in a week; and
- Last more than two months.
Based on the Tripartite guidelines agreed between the unions, employers and the Ministry of Manpower, the affected workers should receive no less than half of their gross salary during the days that they are laid off.
A company that is paying its employees half of their salaries during the days that they are laid off could also arrange for them to take half-day paid annual leave on those days.
In doing so, the employees will be able to continue receiving their full-day earnings, including the half-day salary the employer is paying. However, the employees should not be made to consume more than 50% of their earned annual leave for this purpose.
Retrenched employees who need help looking for jobs can visit any of the Distributed CareerLink Centres run by the Singapore Workforce Development Agency (WDA) and its partners.